LAHORE - The equity market witnessed a positive activity on the back of encouraging corporate results, as most of the scrips in the lead of oil and gas sector, banking and fertilizers showed bullish performance. Experts said that investors are still awaiting the major earning announcements next week. Overall, the KSE Index gained 221 points to close at 10,652 level, up by 2.1 weekly. Market participation also improved with average daily traded volume clocking in at 122 million shares compared to 90m last week. Average daily traded value followed suit settling at USD41.9mn compared to USD35.6mn last week. Law and order situation in Karachi remained in utter chaos over the week, with sporadic shoot outs spanning in nearly every corner of the city. The Supreme Court delivered a short order on case regarding certain clauses of the 18th amendment (earlier passed through by the Parliament). According to the judgment, Article 175-A of the Constitution will be sent back to the Parliament for review as it was claimed to be against the interest of the freedom of judiciary. All eyes were on the Supreme Courts judgment on the 18th Amendment which came on Oct 21, 2010 easing off tension with the government and hence restored investor confidence. This coupled with slightly higher than expected corporate results of PPL, FFBL and ABL and improved macro variables. SCs decision on the 18th Amendment that eventually came in strengthened investor confidence as it prevented a possible face off between the GoP and the Judiciary. Positive economic data also improved the markets mood, as the Current Account for Sep came in at US$447mn along with the foreign exchange reserves hitting an all time high of US$17.1bn for the week ending Oct 15, 2010. However, the recent floods and consequent dip in fuel output caused a 3.58%YoY contraction in LSM activity for the month of August. Notable results that beat street expectations during the week included; ABL declared profits of Rs5.8bn (EPS Rs7.48), FFBLs earnings grew 62%YoY to Rs2.9bn (EPS: Rs3.14) courtesy a bumper offtake in Sep. PPL posted PAT of Rs7.8bn (EPS: Rs6.5) versus Rs5.0bn (EPS: Rs4.2) in the corresponding period last year. However, PSOs results were slightly below market expectation with profits of Rs810mn (EPS of Rs4.72) due to 1% turnover tax in 1QFY11. We also believe current sentiments to be dictated by pre-result anticipation of key results including; MCB, HBL, NML, Engro, OGDC, HUBC due to be announced next week. Rabia Tariq, stock market expert said that foreigners were net buyers of worth US$2.8mn. Ahsan Mehanti, Director at Arif Habib Investments Limited said that positive activity was witnessed in scrips across the board with rising volumes in Oil, banking & fertilizer scrips as investor await major earning announcements next week. He said bullish sentiment continued as conflicts defuse for Judiciary and government post Supreme Court verdict on 18th Amendment and political agreement on peace in the city. Rise in international oil prices near to $82, renewed foreign interest in Pakistan Oil & Gas, banking scrips, rise in local cement prices and expectation of early disbursement of rehabilitation funds for flood affected regions played a catalyst role in positive activity at KSE despite below expected result announcements in Oil sector on turnover tax woes. It is encouraging to note that the current account balance for the month of Sep10 turned into surplus of $447m against the deficit of $372m recorded in Aug10. While improvement in institutional respect in the country is to be taken positively, only improving law an order situation is likely to put more faith in the market. Instituting a leveraged product, clarity on CGT filing and mechanism however remain the other key main triggers. Technical Outlook: Although negative RSI divergence is evident on weekly charts, the inherent strength of the prevailing trend is expected to take KSE100 Index at new highs; levels around 10,840 can be considered a reasonable immediate target On the last trading day of the week inching up gradually, the market has finally overcome resistance of around 10,550; this hints of upside potential towards 10,670 - 10,730. However it is pertinent to note that the front seat has been taken by second and third tier stocks while performance of blue-chip stocks has remained subdued creating a divergence of interest. We are of the view that rally may prolong towards the aforementioned range. Stay long with risk defined below 10,470. Salman Abduhoo